NetSpend 2013 Annual Report Download - page 22

Download and view the complete annual report

Please find page 22 of the 2013 NetSpend annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 84

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84

The Merchant Services segment results are driven by
dollar sales volume and the authorization and capture
transactions processed at the point-of-sale and
clearing and settlement transactions. This segment’s
authorization and capture transactions are primarily
through dial-up or Internet connectivity.
For the year ended December 31, 2013,
approximately 93.4% of the revenues of TSYS’
Merchant Services segment relate to volume-based
services and, are influenced by several factors,
including volumes related to transactions and dollar
sales volume. The remaining 6.6% of this segment’s
revenues are derived from value added services,
chargebacks, managed services, investigation, risk
and collection services performed.
NetSpend
The NetSpend segment is a program manager for
FDIC-insured depository institutions that issue GPR
cards and payroll cards and provide alternative
financial services to underbanked consumers in the
United States. The products within this segment
provide underbanked consumers with access to
FDIC-insured depository accounts with a menu of
pricing and features specifically tailored to their
needs. This segment has an extensive distribution
and reload network comprised of financial service
centers, employers, and retail locations throughout
the United States. The NetSpend segment markets
prepaid cards through multiple distribution channels,
including alternative financial service providers,
traditional retailers, direct-to-consumer and online
marketing programs and contractual relationships
with corporate employers.
The NetSpend segment’s revenues primarily consist
of a portion of the service fees and interchange
revenues received by NetSpend’s prepaid card
Issuing Banks in connection with the programs
managed by this segment. Cardholders are charged
fees for transactions including fees for PIN and
signature-based purchase transactions made using
their prepaid cards, for ATM withdrawals or other
transactions conducted at ATMs, for balance
inquiries, and monthly maintenance fees among
others. Cardholders are also charged fees associated
with additional products and services offered in
connection with certain cards including the use of
overdraft features, bill payment options, custom card
designs and card-to-card transfers of funds initiated
through call centers. The NetSpend segment also
earns revenues from a portion of the interchange fees
remitted by merchants when cardholders make
purchase transactions using their cards. Subject to
applicable law, interchange fees are fixed by card
associations and network organizations.
Below is a summary of the NetSpend segment:
(dollars in millions)
Year Ended
December 31,
2013
Total revenues ................... $ 207.9
Revenues before reimbursable
items ......................... 207.9
Adjusted segment operating
income1....................... 59.7
Adjusted segment operating
margin2....................... 28.7%
Key indicators:
Number of active cards .......... 2,835.0
Number of active cards with direct
deposit ...................... 1,321.1
Percentage of active cards with
direct deposit ................ 46.6%
Gross dollar volume ............. $7,748.5
1Adjusted segment operating income excludes
acquisition intangible amortization and expenses
associated with Corporate Administration and Other.
2Adjusted segment operating margin equals adjusted
segment operating income divided by revenues before
reimbursable items.
The results noted above are for the period from
July 1, 2013, the date that TSYS acquired NetSpend,
through December 31, 2013. Number of active cards
represents the total number of prepaid cards that
have had a PIN or signature-based purchase
transaction, a point-of-sale load transaction or an
ATM withdrawal within three months of the date of
determination. Number of active cards with direct
deposit represents the number of active cards that
have had a direct deposit load within three months of
the date of determination. Gross dollar volume
represents the total dollar volume of debit
transactions and cash withdrawals made using the
prepaid cards the NetSpend segment manages.
20